Macro Briefing: 19 February 2024

* ‘Soft landing’ debate for US economy in focus again after latest reports
* New signs emerge that America’s shale-oil boom is peaking
* US says it will react if China dumps goods on global markets
* China reports record upsurge in travel, which may presage stronger growth
* China’s central bank leaves key policy rate unchanged
* Regional banks are vulnerable to risk tied to commercial real estate lending
* US natural gas prices plunge amid warm winter weather
* US producer price inflation rose more than expected in January:

Continue reading

Book Bits: 17 February 2024

Goodbye Globalization: The Return of a Divided World
Elisabeth Braw
Summary via publisher (Yale U. Press)
A bold new account of the state of globalization today—and what its collapse might mean for the world economy. After the Cold War, globalization accelerated at breakneck speed. Manufacturing, transport, and consumption defied national borders, companies made more money, and consumers had access to an ever-increasing range of goods. But in recent years, a profound shift has begun to take place. Business executives and politicians alike are realising that globalization is no longer working. Supply chains are imperilled, Russia has been expelled from the global economy after its invasion of Ukraine, and China is using these fissures to leverage a strategic advantage. Given these pressures, what will the future of our world economy look like? Elisabeth Braw explores the collapse of globalization and the profound challenges it will bring to the West.

Continue reading

Macro Briefing: 16 February 2024

* Partial government shutdown on March 1 possible without political compromise
* US homebuilder sentiment improves for third straight month in February
* Industrial output in US ticked down in January, remaining soft for second month
* Regional Fed mfg surveys (Philly and NY) for February show mix results
* US jobless claims drop to one-month low as layoffs stay low
* US retail sales fell more than expected in January:

Continue reading

The Sloppy Dance Between The US 10-Year Yield And Inflation

Yesterday I outlined the case that several ‘fair-value’ models suggest the current US 10-year Treasury yield appears high relative to the fundamentals. As a quick follow-up, what does a simple empirical review of historical suggest vis-à-vis the 10-year rate and the latest offending inflation data point that triggered a sharp rise in the benchmark yield on Tuesday?

Continue reading

Macro Briefing: 15 February 2024

* US stock market rally still long way from irrational exuberance: SocGen analysts
* Immigration wave delivers economic windfall for US–at a price
* Nvidia passes Alphabet in market cap to become 3rd most valuable US firm
* Japan economy unexpectedly fell in fourth quarter
* UK economy contracted in fourth quarter
* Bitcoin market cap regains $1 trillion market cap after latest rally
* US mortgage rates are rising again, taking a toll on housing demand
* US 10-year Treasury yield dips for first time in over a week:

Continue reading

10-Year US Treasury Yield ‘Fair Value’ Estimate: 14 February 2024

The US 10-year Treasury yield spiked yesterday following the release of hotter-than-expected consumer inflation data in January. The news also convinced the market that the Federal Reserve would push the first interest rate cut for this cycle later into the year. But a fresh run of “fair value” modeling continues to suggest that the 10-year yield is elevated relative to macro conditions.

Continue reading

Macro Briefing: 14 February 2024

* Fed expected to delay rate cuts after hotter-than-expected inflation data
* US 10yr Treasury yields rises sharply to 4.32%–highest since November
* Can a resilient US economy withstand higher interest rates?
* US patent office rules that AI systems cannot be named inventors
* Bitcoin rises above $50,000, showing resilience after hot inflation report
* US consumer inflation is firmer than expected in January:

Continue reading

High Yield Bonds In Emerging Markets: 2024’s Upside Outliers

Much of the global bond market is struggling this year, with a conspicuous exception: below-investment-grade bonds issued by companies in emerging markets. Based on year-to-date results through Monday’s close (Feb. 12), this slice of global fixed income is outperforming and delivering a rare bit of strength in an otherwise lackluster field, based on a set of ETF proxies.

Continue reading

Macro Briefing: 13 February 2024

* Rate cuts probably won’t start until the summer, says Atlanta Fed president
* January consumer inflation expectations “mostly stable,” reports NY Fed survey
* Saudi Arabia’s Aramco suspends expansion plans due to green transition
* Natural gas prices fall to 3-1/2 year low on
* Japan’s stock market continues to test multi-decade highs
* US small business optimism remains below 50-year average in January:

Continue reading